Peterson Company purchased land, building, and equipment for a ...

[imowrer]

Peterson Company purchased land, building, and equipment for a total cash price of 900,000.
 
  An independent appraiser told management that if the assets had been acquired separately, the company would have paid 300,000, 700,000, and 200,000, respectively, for each of the assets purchased. Write your answers on the lines provided and show your work in the space provided below each question.
 
  1. Use the relative fair market value method to determine how much of the 900,000 purchase price should be used for each of the three separate assets.
  ______________ should be used for the cost of the land.
  ______________ should be used for the cost of the building.
  ______________ should be used for the cost of the equipment.
 
  2. Determine how much depreciation expense the company will have each full year using the straight-line method and the following assumptions:
   The building has a 30-year useful life and a zero salvage value.
   The equipment has an 8-year useful life and a 50,000 salvage value.
  ______________ annual depreciation expense for the building
  ______________ annual depreciation expense for the equipment

Question 2

The amount of the adjusted balance appearing on the bank reconciliation as of a given date is the amount that isshown on the balance sheet for that date.
 a. True
  b. False
 
   Indicate whether the statement is true or false

[leeeep]

Answer to Question 1

1. The total fair market value of the assets if they had been purchased separately is: 300,000 + 700,000 + 200,000 = 1,200,000.
Land: (300,000/1,200,000) x 900,000 = 225,000
Building: (700,000/1,200,000) x 900,000 = 525,000
Equipment: (200,000/1,200,000) x 900,000 = 150,000
2. Depreciation for the building: 525,000/30 = 17,500
Depreciation for the equipment: (150,000-50,000)/8 = 12,500

Answer to Question 2

True